Why Trump’s grade on the economy is stuck at a B

President Trump thinks the U.S. economy under his watch is the greatest ever, or close to it. Yet for the last seven months, he has only earned a B on the Yahoo Finance Trumponomics Report Card. What gives?

A detailed look at the data for our Trumponomics Report Card, provided by Moody’s Analytics, explains why the Trump economy is good, but not great. We track six economic indicators and compare the numbers under Trump with the same metrics under six prior presidents, going back to Jimmy Carter in the 1970s. Here’s how Trump measures up:

Source: Yahoo Finance, Moody’s Analytics

Job growth under Trump has been strong, but it was stronger under Bill Clinton and Jimmy Carter at the same point in their presidencies. Under Carter, in fact, job creation was 89% higher through August of his second year than it has been under Trump. That’s not a ding against Trump. Instead, it reflects the industrial-era economy of the 1970s, before technology, globalization and other factors transformed the labor force.

In that context, it’s a bit surprising that manufacturing employment under Trump is a bright spot. The Trump economy actually outdoes the Clinton economy on job growth in manufacturing, trailing only the Carter economy (by a lot). It’s a myth that we don’t make anything in America any more. We actually make a lot—manufacturing output is at record highs. It takes fewer people to operate factories these days, yet manufacturers are still hiring.

In our latest monthly update of the Trumponomics Report Card, Trump went from third to second in terms of stock-market performance under his watch, pulling ahead of George H.W. Bush. A recession was starting in 1990, Bush’s second year in office, and stocks began a six-month correction in July of that year. The one president who oversaw stronger stock-market performance after 19 months was Barack Obama, and that’s largely because a market crash that preceded his election ended in his second month in office, when a rally began that’s still underway.

Trump fell by one notch on exports in the latest Trumponomics update, falling from second to third best, out of four. (Export data only goes back to 1993.) That’s somewhat ironic, because one of Trump’s top priorities is reducing the U.S. trade deficit. Yet declining exports make the trade deficit larger. Exports have fallen largely because the dollar is getting stronger as the Federal Reserve raises interest rates. Economists expect further weakness in exports as rates go higher still.

Source: Yahoo Finance

Earnings growth under Trump is so-so, which was also the case under Obama. Weak earnings growth has been a persistent problem for nearly two decades, which has economists puzzled. Workers seem to have less power to demand higher wages than they did decades ago, even in a tight labor market.

Trump bragged about second-quarter GDP growth, which hit a robust 4.2%. But that was juiced by the Trump tax cuts and a short-term boost in government spending, whose effects will dissipate in coming years. Moody’s Analytics expects the economy to grow by just 3% overall in 2018, and 2.7% in 2019. Trump lags behind Clinton and Carter on GDP growth, just as he does on employment.

Our Trumponomics grade would rise from B to B+ if Trump rose by two notches in any of our six categories, combined—such as a one-notch improvement in earnings and exports. Trump would have to fall by four notches, combined, to drop from a B to a B-. So for now, his grade seems more likely to go up than down.

Does Trump himself deserve credit for everything positive happening in the economy? No president does. The business cycle has its own rhythm and largely transcends presidential terms. Trump’s tax cuts and deregulatory efforts have probably helped at the margins, however. And presidents tend to get credit or blame for what happens to the economy on their watch, whether they deserve it or not. Even if Trump thinks he deserves an A, a B is pretty good.